Download 4.2 Economic Growth

4.2 Economic Growth
WHAT IS MEANT BY ECONOMIC GROWTH
AND HOW CAN IT BE MEASURED.
2.
DISTINGUISH BETWEEN GDP AND GDP
PER CAPITA
1.
 Key Terms p.54
 Economic Growth
 Output is measured as GDP – this being the value of
goods and services produced within the country in a
year.
GDP per Capita
 GDP divided by the population.
 Average output (income) which each person in the
country has.
The Causes of economic growth
 Investment
 Changes in technology
 Larger workforce
 Education & Training
 Natural Resources
 Government policies.
Reminder
 N – NON
 A – ACCELERATING
 I – INFLATION
 R – RATE
 U- UNEMPLOYMENT
 Issue between unemployment and inflation. Do we
really want ‘full unemployment’
 Unemployment 15%
 Unemployment





15%
10%
7%
5%
4%
NAIRU
Inflation
2%
2.5%
3%
6%
10%
 The government would be happy with unemployment of
7% as after that inflation accelerates. The issue being the
government can not always tell when inflation will
accelerate until it already has.
Important economic theory.
 Ceterus Paribus - “all things remaining equally”
 In economics we have to assume that the judgements
we make are done so, when all things are remaining
equal.
 However other factors (people, time, circumstances)
can change how policies may work. A policy that
worked well last time may not always work well this
time.)
 See Production Possibility Curve.